Could Some People Get a Mortgage Rate of 0%?

There’s a new bill titled “LIFT—the Low-Income First Time-Homebuyer Act” that would create a new 20 year fixed rate loan through HUD/FHA. This bill requires the buyers to be first-generation home buyers and to have income < 120% of an area’s median income.

According to the bill, Ginnie Mae, HUD, and the Treasury would subsidize the interest rate and origination fees so that the monthly payment would be in line (equal?) with a new 30-year fixed rate loan from FHA. Assuming a 30-year FHA fixed rate loan of 3% would require the 20-year loan to have a 0% rate for the payment to be equal. That’s right, a 0% rate. Still, where will this money come from? I bet it will come from every other mortgage borrower who will be required to pay a higher interest rate to fund this program if it becomes law. Is this fair?